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Mississippi Power, Chevron await regulator approval for Kemper deal

Mississippi Power, Chevron and other intervenors reached a deal last week that could end the standoff over who pays for the Kemper Project, but the Public Service Commission will have to approve any settlement.

Not everyone is signing onto the settlement deal. The Public Utilities Staff, a separate regulatory agency from the PSC, says the company is trying to pass costs on the plant's now-shuttered coal gasification plant on to customers by inflating costs on the combined cycle turbines that have generated power on natural gas since August 2014. It wants customers to pay less for the plant, between $125 million and $175 million less.

The deal reached between Mississippi Power, Chevron, Chemours and several federal agencies such as the U.S. Air Force includes:

  • More than $906 million on capital costs for the combined cycle turbines, transmission lines and other equipment.

  • $25 million in annual operations and maintenance costs.

  • A reduction in the amount customers would have to pay through rates from $123 million to $118 million.

  • Regulatory costs would be paid for by customers over an eight-year span rather than the 20-year time frame that the company sought.

  • The company would receive a smaller guaranteed rate of return on the power plant.

  • The removal of the company's ability to recover costs for the gasification plant from ratepayers from the plant's certificate that authorized Mississippi Power to build and operate it.

  • After six months from a deal being reached, the PSC would conduct hearings and investigate issues with Mississippi Power's excess generation capacity, which would be 27 percent more than before with Kemper added to its fleet.

One estimate in testimony put the price of an equivalent capacity natural gas plant at $566 million while another put the cost at $664.8 million.

The PSC has plenty of options. It could approve the settlement as written, but is not bound by the terms reached by the utility and intervenors in the docket. It has the ability to make customers pay even less in its final order, which is expected to be reached in January.

The PSC will conduct hearings starting December 4.

The $7.5 billion plant was originally designed to be fueled by lignite coal converted into synthesis gas, but will now to become a natural gas power plant after the company decided to abandon the gasifier units after three years of trying to get them operational. The plant was originally supposed to be operational by May 2014 and the company has already written off more than $6 billion in costs related to the gasifier.

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